Saving money is one of the most important aspects of building wealth and having a secure financial foundation. Yet many of us have learned the importance of saving money through trial and error, and more importantly, experience.
But there are ways to empower the next generation, and that starts by teaching children the importance of saving from a young age. If you are a parent, here are 6 ways to teach your children about saving money.
1. Start with a piggy bank / savings jar
A piggy bank can be a great way to teach your kids the importance of saving, while giving them an easy way to do it. Tell your kids that the goal is to fill up the piggy bank with notes and coins, until there is no room.
Illustrate that the piggy bank is for saving money for the future and that the more they save, the more their money will grow.
2. Open a Junior Account
Once the piggy bank is full, take your child to the bank to open up a savings account for them. Have them count how much money is going to be deposited, so they can have a physical understanding of how much money they have. Show them the final number and reinforce the idea of interest.
It can provide a great source of motivation for your kids if they understand that their money will grow over time as long as they don’t touch it.
3. Make it practical
When your kids really want the latest and greatest toy or a new action figure, let them know they will have to save up for it. Give them a jar for each of their desired purchases and offer them a small allowance each week in a denomination that encourages savings.
To encourage saving up for their short-term goals, put a picture of their desired toy or item on the jar, so they have a visual reminder of what they are working towards.
4. Avoid an ‘Open-Wallet Policy’
Don’t give your kids an open line of credit, even if you can afford to spoil them every once in a while.
You’ve surely gotten used to telling your kids “no” on other matters. Putting your foot down on requests for cash or parent-aided purchases is no different. It’s important to lay out this marker early in your kids’ financial education – the longer you wait, the harder old habits will die.
5. Lead by example
Kids learn by what we do, not what we say.
You’re your kids’ most visible and important role model. (This may change during their rebellious adolescent years, but they’re all yours when they’re young). By visibly following through on the fiscal wisdom you dole out to your kids, you show them that it’s possible to live within your means.
6. Start a conversation
One of the most important things you can do is to start a conversation about money and the importance of saving.
Let your children know they can have an allowance, but it’s up to them to save up for things they really want. In addition, illustrate how much their money can grow over time if they save.
7. Let them make mistakes
If you constantly rescue your kids from poor decisions then they will never learn the consequences of their choices. If your child is saving towards a specific goal but then drains their savings for canteen money on a whim, it is a great chance for them to learn that once you spend your money it is gone.
Teaching kids how to save money may seem like a tough task. But using these tips, you can make your child’s understanding of money fun and accessible. It’s an investment in knowledge which truly pays the best interest.